FAQs on the procedure to apply for registration as a Composition Taxpayer under GST in India.
Q1. Who is eligible to opt for the Composition Scheme under GST?
A. A regular taxpayer with an aggregate annual turnover up to a specified limit (currently INR 1.5 crore, and INR 75 lakh for special category states/UTs) based on their domestic PAN-based turnover in the preceding financial year can opt for the composition scheme. This limit is subject to change as per government notifications.
Q2. Who is not eligible for the Composition Scheme?
A. Certain categories of taxpayers are not eligible for the composition scheme, including those who make:
i) Any supply of goods which are not liable to be taxed under GST.
ii) Inter-state outward supplies of goods.
iii) Supplies through electronic commerce operators who are required to collect tax under section 52 (TCS).
iv) Manufacturers of notified goods (ice cream, pan masala, tobacco, etc.).
v) Casual taxable persons.
vi) Non-Resident Foreign Taxpayers.
vii) A person registered as Input Service Distributor (ISD).
viii) A person registered as Tax Deductor at Source (TDS) or Tax Collector.
ix) SEZ Unit/SEZ Developer.
Q3. What are the key conditions to avail of the Composition Scheme?
A. The main conditions are:
i) You cannot claim Input Tax Credit (ITC) on your purchases.
ii) You cannot make exempt supplies.
iii) You must pay tax at normal rates for transactions where you are liable under the Reverse Charge Mechanism.
iv) If you have multiple businesses under the same PAN, all must be registered under the composition scheme or none can be.
v) You must mention “composition taxable person, not eligible to collect tax on supplies” at the top of every bill of supply you issue.
vi) You must display a signboard at your place of business stating that you are a “composition taxable person”.
Q4. How do I apply to opt for the Composition Scheme if I am already registered as a regular taxpayer?
A. To opt for the Composition Levy as an existing registered taxpayer, you need to file Form GST CMP-02 online through the GST portal.
i) Login to the GST portal.
ii) Navigate to Services > Registration > Application to Opt for Composition Levy.
iii) Fill and submit Form GST CMP-02.
Q5. How do I go from the regular to composition scheme in GST?
A. A normal taxpayer under GST needs to file an application to opt for the Composition Levy in Form GST CMP-02 on the GST Portal prior to the commencement of the financial year for which they want to exercise this option.
Q6. When can I opt for the Composition Levy?
A. i) New Taxpayers: At the time of applying for new GST registration using Form GST REG-01.
ii) Existing Taxpayers: Before the commencement of the financial year by filing Form GST CMP-02.
Q7. I am already availing the composition scheme. Do I need to file a fresh application?
A. No, taxpayers already availing the composition scheme do not need to file a fresh application each year, provided they continue to meet the eligibility conditions and comply with all relevant rules and restrictions.
Q8. Is it mandatory to file a Stock Intimation (Form ITC-03)? How do I file it?
A. Yes, it is mandatory to file a Stock Intimation in Form ITC-03.
i) You need to furnish details of stock held on the day preceding the date from which you opt for the composition scheme, including inward supplies from unregistered persons.
ii) This stock intimation is generally required to be filed within 60 days of the date from which Composition Levy is sought.
iii) File Form ITC-03 on the GST portal.
Q9. Is approval required from tax authorities for opting for the Composition Levy?
A. No, the application to opt for the Composition Levy is not subject to approval by tax authorities. Upon filing the application, you will be marked as a composition taxpayer in the GST system. However, authorities may initiate proceedings to compulsorily convert you back to a normal taxpayer if you are found to be ineligible or have not filed the Stock Intimation.
Q10. Can I save the Application to Opt for Composition Levy?
A. Yes, the application can be saved for up to 15 days from the date of initiation. After this period, it may be purged from the system. Saved applications can be accessed under “My Saved Applications” on the GST portal.
Q11. Can I opt for Composition Levy if I deal in services?
A. Yes, you can opt for Composition Levy even if you deal in services. This has been applicable from FY 2019-20 onwards. This includes restaurant services and other service providers (or mixed suppliers of goods and services) with turnover up to INR 50 lakh in the preceding financial year (subject to conditions).
Q12. What type of document should a composition taxpayer issue for supplies?
A. A composition taxpayer cannot issue a tax invoice. They must issue a “bill of supply.”
Q13. What returns do I need to file as a composition taxpayer?
A. Composition taxpayers are required to file:
i) FORM GST CMP-08: A quarterly statement for tax payment, to be filed by the 18th of the month succeeding the quarter.
ii) FORM GSTR-4: An annual return for each financial year (For current applicable timelines, refer to the “Important Dates” section on the GST portal).
Q14. Can I opt for Composition Levy if any GSTIN under the same PAN is registered as a SEZ Unit/SEZ Developer?
A. No, you cannot opt for Composition Levy if any GSTIN under the same PAN is registered as a SEZ Unit or SEZ Developer.
Q15. Am I allowed to claim Input Tax Credit (ITC) as a composition taxpayer?
A. No, taxpayers under the composition scheme are not allowed to claim Input Tax Credit (ITC) on their purchases. Buyers from composition taxpayers also cannot claim ITC.